SmartSound manufactures headphone cases. During September 2011, the company produced and sold 105,000 cases and recorded the following cost data:

Requirements 

1. Compute the price and efficiency variances for direct materials and direct labor.
2. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance.
3. Prepare a standard cost income statement through gross profit to report all variances to management. The sale price of the headset cases was \($1.50\) each.
4. SmartSound’s management used more-experienced workers during September. Discuss the trade-off between the two direct labor variances.

Transcribed Image Text:

Standard Cost Information: Direct materials Direct labor Variable manufacturing overhead Quantity Price 2 parts $ 0.15 per part 0.02 hours $ 9.00 per hour 0.02 hours $ 9.00 per hour Fixed manufacturing overhead ($28,500 for static budget volume of 95,000 units and 1,900 hours, or $15 per hour) Actual Information: Direct materials (235,000 parts @ $0.20 per part = $47,000) Direct labor (1,700 hours @ $9.15 per hour = $15,555) Manufacturing overhead $61,000